Reader Mailbag #5

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Each Monday, The Simple Dollar opens up the reader mailbags and answers ten to twenty simple questions offered up by the readers on personal finance topics and many other things. Got a question? Ask it in the comments. You might also enjoy the archive of earlier reader mailbags.

As usual, we’ll start things off with a few links to older articles that directly answer questions I’ve heard recently.
Which credit cards are worth keeping and the only two cards I use
Preparing for a job loss
Dealing with a financially crazy family

And now, let’s dig into some good questions.

Why do we devote so much time working, or saving money or spending money? What is the point? What is there to show for everything?

The way I see it we can either be hedonistic and spend our time trying to get the most for ourselves during our short life, or sacrifice our lives in order to help other people be hedonistic.

Any comments?
- dman

I think the key to really digging into this question is to realize that money represents time. We earn money by spending some portion of our time doing something that we don’t want to do. In exchange for that time, we get some amount of money. Incidentally, this means that the best job in the world is the one where you spend the least amount of time doing stuff you don’t want to do. If you enjoy your job, the pay doesn’t really matter – it’s a great job because you’re actually getting paid a lot for the very little time spent doing something you don’t enjoy.

Time itself has different levels of quality. For instance, I find the time spent reading my son a book or teaching my daughter how to feed herself mashed potatoes with a spoon or reading a thought-provoking work of literature to be incredibly valuable time, whereas time spent reading legal documents has a low level of quality.

My opinion is that everyone on earth is striving to have the maximum amount of high quality time and that’s the meaning of life. For most people, this seems to center around relationships with other people or with intense personal growth, but that’s mostly just an observation.

The problem is that we all have different definitions of what quality time is – maybe you don’t see reading as quality time, for instance. When we share our ideas, we often confuse our own definitions of quality time, at least a little. Then we have individuals out there who are attempting to confuse us even more by giving us different suggestions of what quality time is – in other words, marketers.

The end result is that many people don’t have a good grasp on what their own personal definition of quality time is, and then they end up spending their money to generate lower quality time. The more “noise” that fills their life, the lower the overall quality of the time is that their dollar buys.

If that philosophy is true, the best way to live your life is as follows: do a job you genuinely love regardless of pay and spend your free time focused on things that genuinely leave you fulfilled. The best way to do that is to spend time figuring out what really fulfills you and drives your passions, learning how to live as frugally as possible in every other aspect of your life, and then following that passion with your whole heart.

Ketchup, glass bottle or plastic?
- Rob

Glass bottle, but with a caveat. I hate store-bought ketchup. Seriously – it tastes foul to me, kind of like tomato paste mixed with a ton of corn syrup, a few random spices, and a little bit of vinegar (which, lo and behold, is exactly what it is). I vastly prefer homemade ketchup.

Homemade ketchup, you say? This is something I’m going to talk about in detail on my cooking blog, but here’s a very simple preview. Basically, you take a whole lot of tomatoes, boil them down (way down), add several ingredients including cidar vinegar, onions, brown sugar (oh, yes, so much better than that corn syrup), garlic, fresh ground black pepper, a bit of sea salt, and just a tiny tiny bit of mustard. Boil all of this down until it’s thick – I mean really thick. I like it thick enough that I have to spread it with a knife onto bread. Then can it in jars in boiling water.

This is so many light years better than store-purchased ketchup that I can’t even stand the regular stuff.

Often financial books recommend investing in VFINX, The Vanguard 500 Index….but at $123.23, it seems very pricy as compared with, say, Vanguard’s Star Fund @ $19.95. The Vanguard Star Fund (VGSTX)is a Fund of Funds. Is it better to buy a cheaper, newer fund that is diversified than a more established fund to allow room for greater growth of the fund? It seems to me that the FINX fund is really expensive and offers less value than, say, the Star Fund. Both are diversified, the Star Fund seems even more so….

How does all that work when you are choosing between two good fund, where does the cost of each factor in? Obviously, I would have many more shares of the Star (VGSTX) over the VINX as well….

I haven’t read a book or blog that addresses this specifically and I am just not at that experience level yet on my own.
- Lynn

The individual price of a share in this case makes little difference. What’s actually important is the yield – the annual rate of return of that investment over a long period of time.

Here’s what I mean. Let’s say you have $3,000 to invest. When you wrote this, you could either buy 24.3 shares of VFINX or 300 shares of Hypothetical Fund X, which also tracks the S&P 500. On the surface, it might seem like the latter is a better deal, but the number of shares is really inconsequential. Right now, VFINX has a value of 126.06 per share, which means it has gone up 2.3% since you wrote in. Over that same period, HFX has gone up to 10.23, also a raise of 2.3%.

This means that your 24.3 shares of VFINX, now at 126.06 a share, have a combined value of $3,069. On the other hand, the 300 shares of HFX are now at 10.23 each, giving you a combined value of… $3,069. Regardless of the number of shares, the value in the end is the same.

It doesn’t matter how many shares you have, what matters is the annual rate of return of the investment and the confidence you have in that annual rate of return. That’s the real judgment call to make between VFINX and VGSTX, not how many shares your cash can get you.

I am a college student, and I am an avvid planner. I need to plan my plans. I am always giving myself a headache though, because I don’t know what I want to do with my life. Do you have any advice on finding your calling? I think I read you had changed your major – was there anything that helped you realize what you wanted to do?
- Mol

When I was in college, I had no idea what I wanted to do with my life. I bounced between three majors (and applied for a fourth one, but cancelled the move when I thought about it some more). I wound up with two full bachelors’ degrees in two rather separate fields and a near-minor in a third (I was one class short, I believe).

When I got out of college, I ended up working in a weird field that didn’t really match either of my majors – there was a bit of overlap with both, but the job was truthfully in a grey area in the middle. I usually felt nervous and inadequate and even though I loved the people I worked with and many creative aspects of the work, I eventually came to realize that it wasn’t my passion – or at least not the right place for it, anyway.

My real passion was something I knew all along but I kept ignoring: writing. I ignored it because everyone told me, “you can’t make money writing.” Well, that may be true, but no amount of money can compare to the feeling of getting out of bed each morning and racing to get started because you’re fully passionate about what you do. Work becomes play.

My sister-in-law is in much the same boat. She ended up following her heart to her own financial detriment – in fact, her bravery in her choice was rather inspiring to me.

My suggestion to you is to not declare a major and just take some general electives for the moment and spend some time figuring out what your real passion is. Ignore the blather of what others are telling you about the job you need to have to make money and the career you need to avoid to avoid bankruptcy. I strongly suggest reading through my guide to finding your passion and taking it seriously – then carrying forward what you find into ways to make income from that passion, if you need to.

My oldest of 4 is in the 9th grade. Each child was given money by their grandparents when they passed away; not a fortune, but it will certainly help as we are in no position to pay the high cost of college. I am told this money shouldn’t be in their names when they are applying for college financial aid, but I am unsure what to do with it. Suggestions?
- Betsy

I am a firm believer in charity, especially within my own family. If you have a small amount of money that’s just sitting in a savings account and you’re concerned about it affecting financial aid, use it for family charity. Give it to someone in your family that could really use it right now – all it’s doing for you at the moment is sitting in a savings account collecting a tiny amount of interest and probably hurting your financial aid case. When the time comes, the family goodwill you’ve built up will pay more dividends than your kids can imagine, because charity begats charity. Remember, though, if any money is given to your children during the college funding process, it still needs to be reported on the FAFSA. A “tit for tat” arrangement, which is what some readers thought I was implying before, is not only unethical, but illegal, and can land you in prison – don’t even consider it.

Note: this is an edited answer to the question. My original answer had much the same intent, but suggested a specific example in which one gave money to a specific family member, then that member gave money back during the college years. Many readers (see comments) pointed out that this may imply a contract to “hide” money, which wasn’t my original intention, hence the edits. All comments (including my own original one) are archived in the comments – this was the fairest way I could think of to preserve discussion but also preserve the article.

Which really was the better video game system? The NES or the Sega Master System?
- Bill K.

NES, no question, because it wins in the one area that counts: number of quality games. Side-by-side, the games for the SMS looked better and often played better (just compare the NES Ninja Gaiden to the SMS Ninja Gaiden), but there were far more truly great games for the ol’ NES.

The real battle for my generation was the Sega Genesis versus the SNES versus (yes) the Turbografx 16. I thought the Genesis was atrocious, with only a handful of decent games ever made for it, but that was considered blasphemy among many. On the other hand, there was only one kid I knew who had a Turbografx 16 – and we were all jealous of him. He would bring it with him to parties and we’d play Bonk’s Adventure until the sun came up.

You know, all of that is a pretty good reminder of how intense consumerism was when I was a kid. We were judged based on the game consoles we had and supported.

I’ve heard that you can pay a collection agency the amount of the original transaction (minus fees etc) and they have to take it and remove you from “the system”. Now, they may try and harass you a little bit to recoup some of the fees but you don’t actually have to pay them. Any truth to this?
- navifoto

It’s not quite that simple. There are really two kinds of collection agencies: the ones that work on behalf of a big company to get you to repay a debt (in exchange for some fraction of the debt) and agencies that buy bad debts for a fraction of their value and try to get you to pay up.

The first group, often called “first party agencies,” basically don’t have any wiggle room for negotiation. They’re basically being paid to harass and cajole you into paying the debt back to the group you actually owe money to, and they only get paid if you pay the debt back (usually in full).

The other group, often called “third party agencies,” now own the debt and have usually not paid very much for it. You can usually negotiate with these guys, as they’ll still make a profit even if you only pay part of what you owe.

What do you have to pay? It depends on how damaged you want your credit report to be and how close to usury you want your future loans to be, and it also has to do with your personal honesty – whenever you skip out on a debt, you’ve lied to someone and also stolen from them.

My husband and I are expecting our first child in June. How can we save money on all the things a new baby needs? And what baby things does the industry and other people make us believe we ‘need’ that we can reasonably go without in order to save money? This will likely be our only child. Also, what is the best brand of diapers for the best price?
- Allie

Most of the stuff foisted on new parents is a waste. I speak from experience – I have a two year old and a seven month old here at home. Here’s what you actually need.

Diapers This is the one area that can be expensive. Don’t get cheap diapers – they’ll end up costing you over the long haul. For disposables, we use and love Pampers Swaddlers and, later on, Cruisers – they never seem to leak or break. However, I really, really encourage you to give bumGenius cloth diapers a try, as I mentioned in my post over the weekend. They work as well as disposables and don’t have many of the cloth diaper headaches, plus they fit just about any size of baby. We calculate that you need to reuse a bumGenius about 70 times to bring it down to the cost of one of those Pampers. In other words, they’re a great thing to ask for for baby showers.

Wipes These are useful for preventing diaper rash, but you can use wet cloth – or make your own wipes (they’re way cheaper than buying wipes and do the same trick). Flannel cloth wipes work really well and make for a good baby shower gift if you don’t mind the laundry.

Clothes Your child’s due in June? Go to yard sales and buy bulk kid’s clothes. Seriously, most of the baby and toddler clothes at yard sales were worn only a few times. Similarly, ask around in your family for any hand-me-downs. You don’t need to go buy a new wardrobe.

Bed Your baby needs a place to sleep, but frankly they’ll only use a crib for a year or two before upgrading to a bed. If you’re going to buy new (or an overzealous grandmother wants to buy one), get one that converts into a bed later on. Otherwise, look for a used one at a yard sale and just swap in a fresh mattress.

Food For the first six months, your child will eat either milk or formula, period. Is your wife planning on breastfeeding? If no, then you’ll need some bottles, but don’t worry about a bottle warmer – you can make the formula with warm water and you’re fine. If she is planning on breastfeeding, is she going to be able to do it exclusively, or is she going to have to pump? If she’s going to have to pump, rent one from the hospital if you’re only going to have one child – try to get a Medela Pump in Style, as my wife loves hers (we figured out that buying one was cheaper since we planned on having at least three kids).

Most other stuff, you frankly don’t need it. Receiving blankets? Just use an old t-shirt – they’re perfect for this because they’re soft and can get stained without any concern. Wipe warmers? Wipe your child three times with a room temperature wipe and they’ll be fine. Changing table? Ha! Anything can be a changing table as long as you have an old cloth under the child to catch any accidents. You’ll get a functional diaper bag at the hospital, likely – we use that one for our road trips instead of the expensive cloth one we bought. Children at this age don’t really need toys – the handful they get from happy visitors will be enough. Books at an extremely early age aren’t useful, either, though you should read to the child to teach language skills – I read to my seven month old from The New Yorker (no joke) because we subscribe to it anyway.

In a nutshell, here’s the stuff I’d ask for at a baby shower if we were starting all over again: a lot of bumGenius diapers (each one is like a mountain of disposables), flannel cloths to use as wipes, bottles, and sheets for a crib mattress. I’d also get either a used crib or, if someone was buying one as a gift, a crib that converts into a bed as a baby grows up. I’d collect old tee shirts to use as receiving blankets and burp rags, hit the yard sales for clothes, and take care of any breast pump needs (probably just renting one).

How often do readers flag ads as “unethical?” How often do you agree with them? Are some readers overzealous?
- Andy D.

I receive about two notifications a week about an ad someone thinks is unethical. Most of the time, I block the ads, but not always – I’m mostly concerned about ads that display non-family friendly material or offer bad financial products. When a reader complains about something that doesn’t really fit into either of those two groups, I usually don’t block it. Those complaints usually are the result of an individual with an axe to grind against a particular company or industry for whatever reason.

That’s one of the interesting parts of having a “popular” blog – people come out of the woodwork with all sorts of perspectives and ideas, and they’re not afraid to share them loudly – some of them go off the deep end and become rather frightening. I have a couple people who write me all the time and accuse me of spiritual corruption because I write about money. I had a woman who apparently lives somewhere near me (in rural northern Iowa) send me nude photographs of herself and ask me if I “swing.” For a while, I had a bunch of people who were sending me crazy emails who thought that The Simple Dollar was part of some online “alternate reality game.” I’ve had at least two death threats and one disturbingly Photoshopped image of myself mailed to me. There’s also an army of trolls that love to comment for the sole purpose of riling up other people.

One of my challenges is filtering all of this stuff. What’s legitimate? What’s people grinding their own personal axe? What’s from authentically crazy people? What’s worth pursuing, and what should just be blown off? One problem is that if you guess wrong on one instance, that person will usually wind up here commenting and “proving” that I’m a fraud or they’ll try to escalate it personally.

Why would you pay for your children to do extended international travel, but not pay for private school?
- DNA

For starters, part of the reason is that I live in Iowa, which has stellar public education, and beyond that, I live in one of the best school districts in the state. Furthermore, I would rather my child associate with people of a variety of economic backgrounds than solely with children who can afford private schools.

Even beyond that, I do not want my child’s intellectual growth to be limited by financial means, and if they went to private schools, they would be. A private school might still be somewhat better than the public school in my district, but when comparing that edge in benefits versus the other benefits I could provide – like educationally-oriented trips, home art supplies or music equipment, or the equipment needed to build a giant Tesla coil in the backyard – in an effort to make the home life fulfilling, there’s really no choice for me.

Got any questions? Ask them in the comments and I’ll use them in future mailbags.

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129 thoughts on “Reader Mailbag #5

  1. This is quickly becoming my favorite feature on The Simple Dollar! I was also curious about the “Unethical Ad” reports, so thanks for addressing that one.

    I have to agree with you on the NES – reading your thoughts on Ninja Gaiden brought back memories of my friends and I battling it out on Tecmo Bowl after football practice. At least I think that was on the NES, maybe it was Sega. I don’t know, they all kind of run together in my memory bank. Regardless, the consoles have come a long way, haven’t they?

  2. I noticed you directed your answers of Alli’s questions towards her husband (“Is your wife going to breastfeed?”)

    Another thing to mention about disposable diapers is that generally, either Huggies or Pampers will work best but not usually both. Some babies fit one better than the other. Personally, the smell of my infant’s pee mixed with the scent of Pampers was so foul that I couldn’t use them, but Huggies were fine.

  3. Your answer for Q1 in mailbag5 – regarding work, life, time & money- is very good. It gives a trigger to start thinking about the really important aspects of life, work, time and money. Many Thanks!!

    I am a regular reader of thesimpledollar.com. I would say you are doing a great service to the world. Doing great. Keep going!!

  4. I have one that I’ve been meaning to ask. I’m in need of a new mop. The old one had gotten to the point that it was making my floors dirtier than they started out. What are some good frugal mop selections? I’ve considered the Swiffer, but it seems like the future costs (i.e. swiffer pads & special cleaner) would be high. Any suggestions?

  5. I disagree with the crib recommendation, especially for a family that plans on having multiple children. For one, you should never buy a used crib. You don’t know if it’s been recalled, if it’s missing parts or had parts replaced with incorrect pieces (especially screws). Older cribs (like what parents today slept in as children) usually do not meet today’s crib safety standards. Your child is going to spend 12-16 hours a day in the crib (usually unsupervised), you want it to be safe. If you have multiple children, that’s 2 years of use per child. Buy a sturdy crib that will handle all of that use (the older the child gets, the more they will abuse their crib. My one year old has gnawed on his crib).

    Also, you didn’t mention the most important piece of baby equipment–a car seat. I’m pretty sure that it’s the law to use car seats for infants in every single state. Hospitals won’t let you leave without one.

  6. I disagree that very small babies don’t need books. There are a number of benefits to things as basic as looking at and talking about illustrations together and learning how to hold a book and turn the pages. The repetitiveness of many books for babies reinforces words and word structures. Books written in verse form teach babies the rhythm of speech and similar-sounding words through rhyme. It may seem like very small babies won’t absorb these things, but I feel that it is never too early to start. “Baby Read-Aloud Basics” by Caroline J. Blakemore and Barbara Weston Ramirez is an excellent resource for information about reading to your child at any age.

    That being said, I agree that you don’t have to go out and buy a bunch of books for your child. Something my wife and I did for our baby shower was to ask that everyone bring a book in lieu of a card and write an inscription on the book instead. And needless to say, the public library is an excellent resource.

  7. WOW. I can’t believe you gave such unethical advice about hiding money for the purposes of getting more money from financial aid. That is totally and inexcusably unethical. And are you serious that your justification was essentially “everyone else is doing it???” Using that logic, why don’t we all just lie, cheat and steal on a regular basis? People should not lie or hide their money to get more free money. That woman’s children were given money to use for college. They were lucky for this and shouldn’t turn the gift into a chance to be greedy and dishonest. Colleges are nonprofit institutions that fundraise money so that they can try to subsidize the cost of education and therefore allow everyone who is qualified to attend. The federal government uses our tax dollars to help with this as well. The whole system works on people disclosing honest information so that these institutions can accurately determine need. Don’t cheat the system (essentially lying to get welfare!) when your children are lucky enough to have some funds. Plus, what a hideous behavior to model for your kids.

  8. I was wondering what do you think of investment websites like Prosper.com? They allow people to lend to others at rates that would generally be much higher than the stock market. I was thinking about giving it a try, but I wonder if the risk is worth the reward. What are your thoughts? Have you used or tried websites like this to diversify your investments or use as a stock alternative?

  9. “WOW. I can’t believe you gave such unethical advice about hiding money for the purposes of getting more money from financial aid. That is totally and inexcusably unethical.”

    Well, for starters, the financial aid groups permit you to do that. If they didn’t, they would change their methods of determining who gets financial aid.

    I plan on teaching my children that one should follow the rules, and if the rules allow you to make choices that will give you a competitive advantage, then by all means, they should do so.

    For posterity’s sake, here’s my original answer to the question:

    Here’s one way you could do it if you have someone you trust, like an uncle. Each year, have your child give a gift to someone else that’s under the gift tax exclusion. So, for example, each child could give $10,000 to this person that you trust. Then, when your child is in college, each year, that trusted person gives a gift of $10,000 back to your child.

    This is completely legal, but it probably won’t help with your oldest child. Financial aid institutions often look back several years to see a family’s financial history and if suddenly an account starts lowering like crazy, you’d better have a good explanation for it. In other words, this strategy might work well for young kids, but not for older ones.

    I am reminded, however, of the family of one student I knew in college. His family was rather poor, but they had saved a lot for his college education. Here’s the trick – they had saved it in cash. Supposedly, there was about $40,000 in $100 bills in a bank vault somewhere while he was riding through school on hardship scholarships and Pell grants.

    Is such chicanery ethical? If it were just one family dealing with financial aid, I’d say that it was quite unethical. However, you’re not operating alone here – there are thousands upon thousands of families trying to get the same financial aid dollars and doing everything within the law to get it. If everyone’s playing that game, you should, too, merely to maintain balance with the other families. If the financial aid groups were bothered by these games, they’d tighten the loopholes.

  10. I’m with KF on this one.
    I am appalled by your advice about hiding money for school!

    “If everyone’s playing that game, you should, too, merely to maintain balance with the other families. If the financial aid groups were bothered by these games, they’d tighten the loopholes.”

    There are people who actually need the money. Families who want to use the federal money instead of their own are extremely selfish.

    KF said was I thinking very well so I will stop, but I must reiterate that is appalling.

  11. Regarding finding your passion:

    I agree about taking generals, but also take the first class(es) in the majors you are thinking of. That is what I started doing this school year. I discovered that I really do like programming and don’t like business classes. Even if you waste a couple classes it is worth it to know you will be doing what you like.

  12. Dee: everyone is playing by the same rules. I say play within those rules, don’t break them. If you know ways to play within those rules to give yourself competitive advantage with others who are trying to get financial aid, you should by all means do it.

    Just because one family doesn’t bother to put in the effort to read the rules and make choices to maximize their advantage doesn’t mean that another family should be “ethically” pushed into not making those choices.

    If this were a “fair” system, it would be 100% scholastic merit based anyway. The simple fact that financial aid exists shows that the system is already deeply, deeply flawed.

  13. “I disagree with the crib recommendation, especially for a family that plans on having multiple children.”

    I tend to have more trust in a crib that has stood up to regular use than a crib that’s fresh from the factory at my local furniture store. Kid tested, mother approved.

  14. Sometimes doing the ethical thing means you allow others to have an advantage over you. That’s where character comes in. Just because you can do something doesn’t mean you should.

  15. College financial aid is now primarily driven by the FAFSA (Free Application for Federal Student Aid), required to be filled out by students (and their parents) at most (if not all) colleges. If you are honest in filling out the FAFSA, you will be reporting all of the parents and student’s financial resources, including cash, savings accounts, investments, etc. Fairness in the system of financial aid depends on honesty by all users.

  16. Trent,

    You missed the most important difference between VFINX and Star…

    STAR contains actively managed holdings, whereas the Vanguard 500 Index is a passive index fund.

    This, the Expense Ratio, and the market-slices each fund contains(Morningstar X-Ray) are the most important aspects of funds.

    I kind of get the impression that you aren’t that experienced of an investor from your posts on this topic?

  17. To follow up, the annual rate of return means nothing. You invest by asset classes and diversification, picking the lowest-cost options available to you to achieve your desired mix of asset classes. I love your blog but find the response to that question terrible…

  18. Trent,
    You are terribly misguided about financial aid and about “playing by the rules.” All aid (for college, for nursing homes, etc.) is intended to be based on true need — not based on hiding genuine assets. It’s like a form of welfare to go to people according to NEED, not according who can hide assets.

    Further, you say that schools allow this. You are wrong. I have completed 3 degrees (BA, Masters, and JD) and have been involved with the financial aid process for all of them. The federal government and schools want the parents AND child to reveal the full extent of their financial situation, and all parties sign off on federal forms saying that they have done this. You are intentionally violating these requirements if you’ve transfered money out of your name for the purpose of hiding/shielding it. That money still belongs to the child (even though they are pretending otherwise on paper) and is in fact money that the child will have available for college expenses. The fact that you realize someone can’t get away with this for an older student indicates that it’s WRONG. The fact that you can be more sneaky and do it with younger children doesn’t make it right.

    Also, there is the intent of laws and the letter of laws. Being an ethical person includes following the intent of reasonable laws, not trying to pathetically squeeze yourself through loopholes.

  19. Trent – are you seriously telling people to hide assets on a nationally published blog so that they can cheat the government and schools out of money?? The questioner is lucky her children were given money for college. It’s sad she wants to turn that blessing into a chance to model questionable ethics.

    I donate money to my university specially to support their financial aid programs, because I was fortunate to benefit from the program. Like all other donors (on which these programs depend), I give money so that kids who have NEED can afford to attend college. I am not donating so that my money can be used to help the students who are the best at hiding their true assets. Furthermore, “everyone” is not doing this. I didn’t do it, and I’m not aware of my dozens of college-educating friends doing unethical stuff like this.

  20. “You are intentionally violating these requirements if you’ve transfered money out of your name for the purpose of hiding/shielding it. That money still belongs to the child”

    Did you not read what I wrote? Gift the money. Don’t retain ownership. Let Uncle Phil do whatever he wants with it. If Uncle Phil wants to buy bubble gum with it, the only thing standing in the way is some family scorn. If Uncle Phil dies, that money goes into his estate and is given to whoever according to his will. The child should have no ownership or relation to that money any more.

    This benefits the family by putting them in a better financial aid position. Hopefully, Phil will choose to help out the child with college, but he has no obligation whatsoever to do that.

  21. Trent,

    Unlike you, I actually am a lawyer and I know the laws. I also work for the federal government and deal with fraud related to government programs.

    You are giving out illegal advice regarding hiding children’s assets in order to get more college aid. No fancy way around it. What matters in fraud cases is people’s intent. The intent of the person who wrote into you would be to hide assets that truly belong to her children in order to qualify for aid that they otherwise would not be qualified for. If this could be proven, and if anyone cared to pursue the matter, the woman who wrote to you would get jail time. Additionally, this would be incredibly disruptive to the child’s college education. In fact, universities will kick out students who are found guilty of fraud regarding financial aid.

    As someone previously pointed out, your questioner and her children would also be breaking the law in terms of the financial aid forms that they are required to sign. These forms require one to divulge all financial resources that the child will have available to assist with paying for college. This doesn’t just include resources in their name. In this instance, the person would be committing fraud, misrepresentation, and other crimes. If caught once, the person will never again be allowed to apply for financial aid.

    You’re a financial novice, not a lawyer. Please stop giving out illegal advice. And get some ethics that go beyond what “everyone” else is doing.

  22. Wanted to suggest a book for Allie and other new parents or parents-to-be who are so wisely trying to protect their budgets: Pamela Paul’s “Parenting Inc.” It’s both escapist and edifying–the escapist aspect comes from reading about misguided excesses–thousand dollar cribs, etc. Made me feel virtuous and frugal in comparison! The edifying part is in her argument that it is better to pay for a consultant, esp. sleep consultant than load yourself down with expensive, cluttery crap. Please excuse my language but I figure your new babe’s too young to be able to read this comment :)

  23. We understand what you are suggesting, and it’s still unethical and illegal. You seriously want us to believe that the money would be GIFTED to the uncle with no strings attached?? That the uncle would spend the money on bubble gum rather than kicking it back to the child during college or after they graduate? That’s ridiculous and, of course, would never be what happened in one of these wink-and-nod situations. Though the child would not retain legal ownership, in reality, anyone doing this would have a verbal agreement that the money would be returned to the child at a later date. That’s why you said to choose someone who is “trusted.”

    If we are going to follow this bizarre logic, why don’t we just all give away all of our money so we can all qualify for as much assistance as possible of all types? Want to put your house, cars and all bank accounts in someone else’s name so that you can cheat the system for even more aid? Furthermore, if someone really is going to take your approach of giving it to an uncle who would be free to do anything with the money, this doesn’t even make financial sense. I’d much rather have actual cash than the mere possibility of a grant or of qualifying for more loans.

  24. “Trent – are you seriously telling people to hide assets on a nationally published blog so that they can cheat the government and schools out of money??”

    Nope, there are no assets to hide.

    I think the objection everyone was raising was that this was seen as some sort of under-the-table chicanery. It’s not. I’m suggesting the family give away the money without a legal agreement and with no strings attached. If they do this in any legal fashion, then it remains an asset of the child, and that’s not what I’m talking about.

  25. The Tax code is set up in a manner that people who know how to exploit it can do so. This goes a long way in qualifying for things like financial aid.

    The question is should this be allowed? If I can afford to have a CPA help me (within the law) hide some money, then why not go for it.

    But then I could qualify for aid best used for someone else that needs it more. The tax code is full of plugged holes in the system to prevent this. The accounting lobby prefers it. The more complicated the code is the more job security they have.

    There’s a moral dilema. Its not really illegal, but should be and probably will be. I’m with KF on this point. Don’t hide money, its dishonest.

    Of course I’ll quickly point to tax and financial aid reform. I could have gone to school for free, but didn’t because my parents didn’t think that was right.

    I have no loans because my Dad’s employer paid tuition and my parents could afford the cover the rest. If they couldnt have afforded it, they would not have hid money to do so. They paid straight out of their paychecks to me, after taxes.

  26. “You seriously want us to believe that the money would be GIFTED to the uncle with no strings attached??”

    That’s exactly what I’m suggesting. This should be a 100% gift to the uncle, no strings attached. That’s the only way this would be fair and legal.

    If that uncle is genuinely a good person, the uncle will likely respond by helping with college expenses, again under the gift tax. But there’s no obligation for the uncle to even think about it.

  27. I think the commenters are understanding you perfectly well: You are suggesting that Betsy gift her children’s inheritances with the understanding that that money will later be used for the children’s college education. If that’s not what you meant, why did you say that the recipient of the gift should be “someone you trust,” why do you say that Uncle Phil will risk “some family scorn” if he uses the money for something else, and why do you refer to the whole process as both “chicanery” and a “loophole”?

  28. I also disagree on the no books recommendation. As a child, thanks to alphabet wallpaper, books and my parents reading to me, I was speaking regularly at 6 months and taught myself to read by age 2 1/2. I doubt that would have happened if I wasn’t introduced to books right from the get-go.

    You could probably get a heap of cheap baby books from the same yard sales as the baby clothes.

  29. I agree with Trent on this one, though I agree it’s a tricky issue. I too use follow the principle, obey the law. If you don’t agree with the law, then use the privileges granted to you (voting, etc.) to get the law changed. Awhile ago, Walmart made the news when it was reported that the company cheated the government out of aroudn $350 million in taxes by using certain real estate tax shelters. This is in principle the same exact issue as financial aid. Did Walmart really cheat in its taxes? No. It followed the law. Just because there was a loophold in the law that allowed it to do this does not mean Walmart did anything wrong. Now, everyone loves to hate Walmart, so they all make sure to point out this fact. But if you don’t like this loophole, don’t hate Walmart. Get the law changed.

    Now, specifically in regards to financial aid, it is inherently unfair. When I attended school, I had an EFC (expected family contribution) almost as high as the tution itself. Thus, I didn’t get any aid at all. Now, my parents absolutely refused to pay anything for my college. I was stuck in the middle. The college made the false assumption that my parents were going to pay for my college, and that I was somehow “rich” because of my parent’s financial state. Thus, I only got through college my taking out a bunch of loans myself.

    Financial aid is inherently unfair. Thus, I have no problem acting within the law to give yourself an advantage, because in most cases, the middle class is already very disadvantaged in this regard.

  30. I think the problem is that commenters are saying that your advice about college money is unethical and you are saying that it’s perfectly legal. You may both be right.

  31. Here’s the opinion of a financial aid employee – The FAFSA only takes into account the previous calendar year financial information (including cash, as mentioned above) for the parent and dependent student. So in terms of federal eligibility, there’s no need to worry about previous years’ worth of information unless there’s a glaring discrepancy that requires further research.

    As a financial aid professional, I would never advise a student to “gift” their own money to a non-immediate family member. Besides arguments for ethics, what if this relative really did “take the money and run”? Even though they’re long gone, how would grandma and grandpa feel knowing their gift went to waste, not to mention the feelings of the child? Also, because financial aid only takes into account the previous year’s records, ideally this would only negatively affect the student for one year – after the money is used to help pay for school, their aid package should reflect higher need.

    However, if I was asked for personal advice, I would at the very least recommend that significant cash assets should be in the parents’ name, not the child, since a much higher percentage of a child’s assets are taken into account than the parent.

    I agree that shifting a family’s money around to gain more aid can be unethical, and I’ve seen families get into trouble for it. However I also agree with Trent that a lot of people do this sort of thing and unfortunately get away with it, and of course that the system is flawed. But I disagree with Trent’s theory that “If the financial aid groups were bothered by these games, they’d tighten the loopholes.” Personally I think everyone is quite aware of just how many flaws and loopholes are in the system – unfortunately right now there doesn’t seem to be enough money, political support, and people willing to do the enormous amount of work to really change things for the better.

  32. For babies:

    First, apart from those things you MUST have ready when the baby arrives, buy nothing until later when you determine that you need it. A lot of baby purchases are just wishful thinking.

    Second, buy a huge box of chux pads. They’re like flattened diapers — absorbent on the front and plastic on the back. Use them as portable changing tables (sanitary and can absorb a baby bladder full of wetness as well as slightly soft). We’ve changed our baby on the ground during hikes in the woods by simply spreading out a pad. Also, slip one between the bottom sheet and mattress in the crib to keep cleanup easier for the inevitable night accidents. Once they get wet just toss them. Until then you can use and cart them around for weeks. Perfect for travel.

    Third, don’t buy a super-expensive electric pump right away. Start by settling into breastfeeding and figuring out your flow and comfort level. Then try a $20 Isis hand pump. If it doesn’t work, you can spring for the $200 electric… but if it does, you’ve saved yourself $180. I went back to work at six weeks and pumped for another 16 months with nothing but the Isis. My super-expensive, bulky, noise electric got used like twice. It was simply more than I needed. Truthfully, by the end of my long run of breastfeeding I could pump by hand.

  33. Trent,
    If that’s really what your suggesting, then it’s just purely idiotic. You seriously think that outright gifting money without any strings is better than just using the money to actually PAY for college? Financial aid isn’t totally predictable, it’s not always guaranteed, and it’s a mixture of grants AND loans. Second, you continue to hide behind technicalities to try to disguise something that’s immoral and possibly illegal as the opposite. Of course the uncle (who you describe as “trusted” and a “good person”) would kick back the money to the child. And of course the intent of all of this is to hide the child’s true assets — why else are we giving money away???

  34. Steve, RE number of cloth diapers-

    There are tons of websites that will give advice for how many CDs you need for different situations. The type of diapers makes a big difference, as well as how often you are willing to do laundry, and how old the baby is. Newborns should go through many more diapers than an older kid, but the older kid will need more absorbency. I got a lot of info from http://www.babyworks.com, where I buy my supplies, but most websites that sell cloth diapers and accessories will be able to answer your question for your situation, considering all of the variables.

    One thing I found out more through word of mouth, though, was the benefit of drying cloth diapers in the sun- the sun will naturally disinfect the diapers and keep stains away much better than a regular dryer. My climate is well suited to this year-round, and it saves the cost of using the dryer. In fact, I was even able to get a great clothesline for cheap off of craigslist.org.

  35. “I think the commenters are understanding you perfectly well: You are suggesting that Betsy gift her children’s inheritances with the understanding that that money will later be used for the children’s college education. If that’s not what you meant, why did you say that the recipient of the gift should be “someone you trust,” why do you say that Uncle Phil will risk “some family scorn” if he uses the money for something else, and why do you refer to the whole process as both “chicanery” and a “loophole”?”

    1. You should give the money to someone you trust because of the nature of a large cash gift. If I were to give a $5,000 gift to someone in my family, the people I would give it to would be the trustworthy folks, not my relative who would use it to make more meth. You don’t give a shotgun to a six year old. You don’t give a pile of cash to the shopaholic or the alcoholic.

    2. Uncle Phil risks a lot of family scorn if anyone in the family gave him a large cash gift and he spent it on qualifying for the World Series of Poker. If someone gives you a large gift, there is a reasonable expectation that you’ll use that gift sensibly. I know if my nephew gave me $5,000 and I spent it on bubble gum, everyone in the family would be really ticked off at me.

    3. The whole process is chicanery because it’s not based on academic merit. It’s messed up that you can live in poor conditions your whole life, get excellent grades, and still not get into college because of FAFSA vagaries. It’s a loophole because it really speaks to the whole messed-up situation that *giving away your money* indicates that you deserve more financial aid than holding onto it. The system rewards you if your family can’t manage money, and punishes you if they can. That’s a loophole if I ever saw one – “we’ll give you *more* money if you show your willingness to take cash and throw it out the window.”

    The fact that this is even a topic for discussion indicates how diseased the situation is.

  36. “That’s exactly what I’m suggesting. This should be a 100% gift to the uncle, no strings attached. That’s the only way this would be fair and legal.”

    “Here’s one way you could do it if you have someone you trust”

    hmmm. Quite the contradiction. Yes it is a gift, but you would not give him the money without some sort of verbal/written agreement that you would get it back. You are giving it on the basis you would get it back through tuition payments by said uncle. Maybe not technically illegal, but definitely questionable on moral and ethical grounds.
    How far are you willing to go to get ahead in life? Some things are not illegal, but morally questionable (abortion). The character of a person is based on what they do to succeed in spite of obstacles or unfairness.

  37. I think part of the problem stems from the fact it sounds like you’re hiding money from the government, which is somehow unethical (render unto Caesar what Caesar is due…). Perhaps a better solution is to not accept the money in the kids’ names, but instead work with the donor to provide a more efficient means of utilizing the gift. In this case, the money was gifted by the grandparents when they died. Perhaps instead, they should have put the money in some sort of charitable trust fund not in the kids’ names.

    Really, though, I don’t have a problem with Trent’s solution, as I stated in my above comment. Here’s another way to think about it: The money was intended to decrease the amount that the child needs to pay for college. If the child was gifted (say) $10,000, his EFC will probably go up nearly that amount, meaning that the end effect is that the gift has no effect. The child will still pay roughly the same out-of-pocket. Trent’s solution is simply finding a way to ensure the gift has its intended effect.

  38. “If that’s really what your suggesting, then it’s just purely idiotic.”

    The family asked how they can improve their chances at financial aid. Do you disagree that giving away the money increases their chances at financial aid?

  39. Rick,
    You whine that financial aid is inherently unfair and try to justify immoral behavior based on this. The actions you are trying to justify make it more unfair. I have no interest in making donations to college or having my taxpayer go to people who can fully afford to pay for college but who have “sheltered” their money. While financial aid calculations can have some unfortunate results, it is generally as fair as possible and tries to get money to those who need it most. Lying and hiding money hinders this process. While it’s another issue, I’m not too concerned that the taxpayer shoulder your college burden because your parents felt like refusing to help.

  40. “Yes it is a gift, but you would not give him the money without some sort of verbal/written agreement that you would get it back.”

    Because people still are making up their own thoughts and adding them, I’ll repeat yet again. No written or verbal agreements that you would get it back.

    As I said, give the money to someone you trust, because that person is much more likely to do something sane with it. I have lots of options in my family for giving my money away to – do you think I’ll give it to the person who makes meth?

  41. I stopped reading several months ago and just stopped by today to see what Trent is up to. Seems like he’s up to the same old stuff – giving out bad advice based on ignorance and then defending it to the end.

    Stick to homemade ketchup recipes, Trent.

  42. So why not suggest giving the money to charity instead? Good charities are transparent with their finances, and you could satisfy yourself that the money was well spent.

  43. Trent,
    Yes, I’m saying that giving away money doesn’t necessarily increase financial aid. (And again, along those lines, let’s just give away everything we own and all qualify for free college, welfare housing, food stamps, nursing homes, etc.) Of course, giving away money will often lead to increased financial aid. But, depending on one’s situation and on how well endowed a college is, it might only increase loans (versus grants) that the child can take out.

  44. “Because people still are making up their own thoughts and adding them, I’ll repeat yet again. No written or verbal agreements that you would get it back.”

    So you are saying you would cut someone a check for $10,000 with no reason why you are giving them the money? No “this is where the money came from”, no “wink wink”? Where would “Uncle Phil” get the idea to give money to your child’s tuition? Try as you might, by saying that you should give it to someone you trust you are actually saying that you expect the money to be given back in some manner. We don’t care how you are packaging it up to say it, that’s what it boils down to. Otherwise, why would the parents just let the kids go out and blow it, or use it to buy them a car when they turn 16?

  45. I would love to hear from or about non-traditional one-income families.. my husband and I are about to become a one-income family (my income!) while he works towards becoming a signed musician.

  46. You explained before about how you make money from page visits, but how do you make money from RSS feeds which don’t actually require readers to go to any pages?

  47. Charities are a fine place to give the money if you trust the charity. Frankly, I tend not to trust charities unless I am involved with them personally – that’s why the only charities I’ve ever suggested on here have a personal connection to me in some way. To me, charity is giving to a family member or a close friend who could use the money and would use it well.

  48. “I tend to have more trust in a crib that has stood up to regular use than a crib that’s fresh from the factory at my local furniture store. Kid tested, mother approved.”

    Not me. You have no clue what that crib has been through. I was with my son at a friend’s house when it was his nap time. I put him down in the used crib she had bought. He threw a fit, kicked the guard rail, and it slid down. It was then low enough that he could have pulled himself standing and toppled out of the crib. Luckily, I saw it and decided it would be better for him to skip a nap than risk a falling injury.

    There are three baby items that should not be bought used: mattresses, car seats, and cribs. You simply do not know the history of any of those items and are putting your child’s safety at risk if you get them used. As I said in my first comment, you don’t know if a used crib has been recalled, you don’t know if parts have been replaced with incorrect parts. The crib could have been used continuously for several years with several children who may have broken parts that are important–such as the mechanism to insure that the drop side won’t fall down if the kid kicks it or rolls into it.

    Spend the money for a new crib. It’ll get used for 12-16 hours a day for two years, more than any other baby item you could possibly buy. I bought a $200 crib from a company that has never had to recall any cribs. If we don’t have any other children and move him out of the crib when he’s 2, he’ll still have spent enough time in it that the price per hour of use is less than $0.02. I’ll spend $0.02/hour of use to know that the drop sides won’t fall, that all the parts are the correct parts, that the crib is up to today’s safety standards, and that I don’t have to worry about the crib causing injury or death.

  49. “So you are saying you would cut someone a check for $10,000 with no reason why you are giving them the money? No “this is where the money came from”, no “wink wink”?”

    Yes, because I am an honest person who believes in individual charity and trusts that when I give money to people I trust, they’ll do good things with it. I am aware that others – apparently including yourself – don’t feel the same way, but I’m not going to change who I am because of that.

  50. “I stopped reading several months ago and just stopped by today to see what Trent is up to. Seems like he’s up to the same old stuff – giving out bad advice based on ignorance and then defending it to the end.

    Stick to homemade ketchup recipes, Trent.”

    A real financial issue is being discussed here – the cash dollar value of personal trust – but you’re too busy dropping insults to participate. Frankly, that’s probably for the best.

  51. Trent,
    Try for one second to take a step back, breathe, and try to move from being defensive to actually learning something. Let’s imagine that someone does follow your illegal advice, a red flag is raised, and the government conducts an investigation. (Not impossible, since an actual lawyer already told you above that this is illegal.) The investigator sees money given to the child (and depending on how it was given and if the person is still alive who gave it, it’s possible to actually confirm that the intent of this gift was to pay for college). Then the investigator randomly sees the family giving this money away to a family member. Then the investigator maybe later sees that that same family member gave money back to the child. It’s a fraud case.

    Furthermore, your scenario is ridiculous and transparent to anyone. There’s is no possible way that a family would say, “Here Uncle Joe, take our 8 year old child’s $10,000.” I’m not aware of anyone on the planet who wouldn’t then say “Why are you randomly giving me $10,000 that your child could actually use?” And I’m not aware of any situation between actual human beings in which there wouldn’t be an implicit agreement about this money being returned to the child. To pretend otherwise is ludicrous.

  52. “A real financial issue is being discussed here – the cash dollar value of personal trust – but you’re too busy dropping insults to participate. Frankly, that’s probably for the best.”

    Your advice was, essentially, “Give the money to Uncle Phil with the agreement that Uncle Phil give it back to the kids.” Now you’re trying to say that your advice was “Give the money to Uncle Phil and hope that he gives it back to the kids”. Nobody would do that. Nobody should do that. It’s ridiculous to even suggest it. The writer deserves either sensible advice or the admission that you have none to give on this topic.

  53. Sarah,

    “I have no interest in making donations to college or having my taxpayer go to people who can fully afford to pay for college but who have “sheltered” their money.”

    Let me ask you: Could I afford college? When I began college, I had $4000 to my name, and my parent’s wouldn’t give me a cent. The college I attended cost $22,000 a year for 4 years. Could I afford it? I think not. But Sallie Mae sure did. The college sure did. That’s why I didn’t get any financial aid.

    The system is unfair. The law exists to provide certain advantages to certain people. Would you try to do what you could to qualify for these privileges? The law provides a child tax credit. Is this fair? What about the people who would rather spend their money on a dog (not tax deductible)? Or what about those who would spend their money supported a presidential candidate who advocates beliefs and positions they hold as well (not tax deductible)? What about the person who invests his money in a “green” business that does a lot to reduce its environmental impact and do its part to “save the earth”? Is this moral? Why does one group get preferential treatment over another group?

    How about Big Oil subsidies? Are these moral? Is Exxon Mobile and the other companies acting immorally by taking advantage of the credits offered them? How about the politicians that gave them these subsidies? Are they moral? Whom did you vote for in the last election?

    How is the politician that voted to subsidize Big Oil any different than the politician that voted to subsidize certain classes of people in their education?

    My point is that we live in a very complex legal and political environment. If you don’t like the law, try to change it. In the meantime, do what you can to take advantage of the opportunites your elected politicians have afford you.

  54. “Charities are a fine place to give the money if you trust the charity. Frankly, I tend not to trust charities unless I am involved with them personally – that’s why the only charities I’ve ever suggested on here have a personal connection to me in some way. To me, charity is giving to a family member or a close friend who could use the money and would use it well.”

    That and charities usually don’t pitch in to help pay for your child’s tuition, right? No one has been fooled by your response to the reader’s question.

  55. This is in response to Joanna’s mop question. I do swiffer on the cheap. I love the easy nature of the swiffer system, but wanted something cheaper and more environmentally responsible. This is what I do. I have the swiffer wet jet mop. I like the angle of the mop and I need the little grippy things on the bottom to make this work. I don’t use the pads. Instead, I have a stack of cut up old bath towels that I use for pads. I use two or three per mopping session. If you wanted to get fancy, you could sew a few layers together to make the pads more swiffer like. I don’t do that…too much work. Instead of buying the spray refills, I have a plant sprayer bottle filled with a homemade general cleaning solution (24 ounces hot water mixed with 1/4 cup vinigar, 3/4 tsp each washing soda, baking soda and borax – I also add 2 drops of lavender essential oil because it smells nice). Spritz the floor then wipe. Do small sections at a time I usually wash a square yard at a time. Just toss the cloths in the wash with your towel load. The cleaning agents also work as laundry boosters!

  56. “Nobody would do that. Nobody should do that. It’s ridiculous to even suggest it.”

    It’s not ridiculous. It’s only ridiculous for you because you place little value in personal trust.

  57. Trent,
    Let’s turn the tables. If you randomly received a check for $10,000 in the mail from a relative with no note, what would you do with it? What do you think they would want you do to with it?

  58. “I’m not aware of anyone on the planet who wouldn’t then say “Why are you randomly giving me $10,000 that your child could actually use?” And I’m not aware of any situation between actual human beings in which there wouldn’t be an implicit agreement about this money being returned to the child.”

    Similarly, you place little value in personal relationships and trust. Thus this arrangement seems ludicrous to you.

    Let’s add another little element. Let’s say Uncle Joe comes to you right now and says, “I’m trying to get an internet startup business going. I need $10K in seed money. I can’t promise you a thing but I really need your help.” Would you seed Uncle Phil that $10K?

    What’s different there? In the end, they’re both matters of personal trust.

  59. Trent: Since you value personal trust so much, what do you think about the trust that the grandparents put in Betsy and her husband that the money they left for their grandchildren would actually be used to benefit the grandchildren? Does that trust count for nothing?

  60. “Let’s turn the tables. If you randomly received a check for $10,000 in the mail from a relative with no note, what would you do with it? What do you think they would want you do to with it?”

    I’d probably call them up and ask them why they sent it. If they said, “It’s help for you getting started with your writing career” or something like that, I’d give a big “thank you” and put it in the bank. I can think of a lot of other reasons why I’d just happily accept the gift, and they’re mostly borne out of trust and long-term trusting relationships with people.

    Similarly, I’m planning already to give my nieces and nephews some gifted financial help when they go to college. I have no obligation to do so. But their parents have helped me a lot during my young adult life. Should that be reported on the FAFSA? I think it’s ridiculous to think so.

  61. “Let’s add another little element. Let’s say Uncle Joe comes to you right now and says, “I’m trying to get an internet startup business going. I need $10K in seed money. I can’t promise you a thing but I really need your help.” Would you seed Uncle Phil that $10K?

    What’s different there? In the end, they’re both matters of personal trust.”

    The difference is it is a totally different situation. You are investing in a possible business in this new scenario. Your original scenario was take the money your kids were given and give it to someone you trust, no strings “attached”, no reason why you are giving it except you are a giving person. All the while hoping they would do the right thing and help pay for tuition later down the road.

  62. Wow, what a great read! I would hate to ask how long it took you to put this article together. A lot of good information there. I particularly liked the home-made ketchup.

    Best Wishes,
    D4L

  63. Jon: there is no difference. In one scenario, you’re investing in a startup. In the other, you’re investing in someone’s education. It’s still an investment.

    To be honest, I don’t like the way this conversation is headed. I wouldn’t give the money “no strings attached.” If I invested $10K in a startup, I would have some sort of contract to ensure some sort of possible return. Sure, the owner of the startup can’t guarantee a return, as the startup might not be successful, but I would still want some sort of stock options of partial-ownership. That’s how investments work.

    I think the key is that Trent is just offering ideas to get the brain rolling. Take these ideas, contact your financial advisor, and do the best thing for you.

    On this site: http://www.finaid.org/fafsa/maximize.phtml

    it says that if you have a 529 custodial account, and the following conditions are met, it is not counted as an asset on the FAFSA:
    – The account must be a custodial account, meaning that the student is both the account owner and beneficiary.

    - Only 529 College Savings Plans, Prepaid Tuition Plans and Coverdell Education Savings Accounts qualify.

    - The student must be a dependent student.

  64. “It’s not ridiculous. It’s only ridiculous for you because you place little value in personal trust.”

    It’s not about personal trust. That’s just you trying to backpedal from the original advice. It was poorly considered advice and your defense of it only makes you look worse.

  65. Honestly on the financial aid thing, the advice could have been more ethical and more simple. The mother needs to retain the money on behalf of the child (since she is already the “owner”) and pay bills as they come in and then use the rest of the money to pay off the loans (or attempt to) at the end of college. That way there is no hiding and nothing fishy. The parent’s money is looked at different from the money that is in the student’s possession.

    Secondly, USED CRIBS. That is a huge no-no. If you absolutely must for some reason (visiting out-of-town) make sure the crib is safe. Baby-tested doesn’t count. Here are the Consumer Products Safety Commissions press release on used cribs (1995).
    http://www.cpsc.gov/cpscpub/prerel/prhtml95/95161.html

    http://www.kidsindanger.org/prodhazards/recalls/cribs.asp

    Most importantly the parent needs to make sure whatever crib they use is completely safe.

    One last thing: No used car seats. And if you have an accident, your insurance will pay for a new one. It is considered a damaged part of the car and even a fender bender means new seats.

  66. “The difference is it is a totally different situation. You are investing in a possible business in this new scenario.”

    No, you’re not. You’re still giving Joe money on a personal basis. You’re not getting anything out of the business whatsoever – he’s promising you nothing at all. There’s no investment here – it’s still just a gift to Uncle Joe.

    The reality here is that you can’t see why you would give money to someone without some sort of promise of getting something out of it. I can. That in itself merits a post of its own.

  67. “It’s not about personal trust. That’s just you trying to backpedal from the original advice. It was poorly considered advice and your defense of it only makes you look worse.”

    It’s about nothing *but* personal trust. You’re saying that you wouldn’t just give money to Uncle Joe because you don’t trust him – you need some sort of an agreement with him that he’ll return the money. I’m saying that *real* trust would allow you to just write a check to Joe and not worry about it at all.

    The difference there is about the value of personal trust, nothing more, nothing less. You put no value in it, so you demand an agreement. I put a lot of value in it, so not only do I not need an agreement, it wouldn’t even cross my mind.

  68. Trent,

    Hmmmm…you don’t trust charities because I assume you want to be sure that your money is going where it is supposed to go. Universities are charities. People like me who donate to them want our money to go to people who truly don’t have resources, not those who shelter their children’s funds. Your advice is corrupting these charities that you apparently would like us to be able to trust more.

    Rick,

    Your logic is awful. Yes, our system is unfair in tons of ways. But, the way to change that isn’t to continue to take advantage of things that are unfair. I disagree with most government subsidies that go to big business, including the oil subsidies you mention. The answer is to work to change them. My parents run a farm and qualify for government subsidies, but they do not take them because they think the system is morally bankrupt.

    Second, there will always be cracks or imperfections in a system, such as the position you found yourself in when your parents refused to pay for college. No system can be perfect, and you aren’t entitled to free college as a result. I’ve thought about this a lot because I was in the same position with my father’s expected contributions. However, I don’t see how the system could change to make it more “fair.” Otherwise, rich parents could just “refuse” to pay for their kid’s college, and the result would be that taxpayers and donors had to foot the bill. Everyone that operates in Trent’s morally questionable universe would just refuse to pay their kid’s college bills, and our whole system of getting aid to the most needy would collapse. So, while imperfect, the system works well enough for me if people don’t try to take advantage of it. And even kids whose parents can pay but who refuse to do so will likely come out okay in the long-run through inheritance and other advantages of being raised by parents who have enough money to pay college bills that they might refuse to pay.

  69. “Is such chicanery ethical? If it were just one family dealing with financial aid, I’d say that it was quite unethical. However, you’re not operating alone here – there are thousands upon thousands of families trying to get the same financial aid dollars and doing everything within the law to get it.”

    It’s obviously clear that it is not unethical for Trent to give this advice as a legitimate in his eyes. His ethical and moral behavior seems be founded more based on the ethics and morals of others rather than personal conviction. People strongly disagree with him, but is not going to change his position just because of that.

  70. “Your advice is corrupting these charities that you apparently would like us to be able to trust more.”

    My advice is to know your charities, trust your charities, and give intensely to your charities. Don’t give a bit of cash to every half-baked cause that comes along – there are millions of ‘em. Instead, find ones that have meaning for you, get to know them, and then give to them intensely and seriously. That’s charity – charity based on trust.

  71. Trent,
    No matter how you try to spin it, this isn’t about trust. In fact, it’s the opposite of trust — it’s about being dishonest and intentionally hiding money from the US government. If you care about trust, then reveal the honest, full intent of your child’s financial situation on federal forms. You are obviously referring to “trust” as in trusting that the uncle would kick the money back to the child. The intent behind all of this is fraud. Stop trying to detract from that with these tangential arguments.

  72. “It’s about nothing *but* personal trust. You’re saying that you wouldn’t just give money to Uncle Joe because you don’t trust him – you need some sort of an agreement with him that he’ll return the money. I’m saying that *real* trust would allow you to just write a check to Joe and not worry about it at all.”

    The writer asked for advice about what to do with some money that is in her children’s names. Are you really trying to say that she should give it to someone with no agreement that the money will be used for her children’s benefit? It’s terrible advice. The personal trust issue is irrelevant.

    Besides, you seem to be implying that you fully expect Uncle Phil to give the money back because you know him so well and trust him to do so. So there is an implicit agreement in your mind. Otherwise you’re just telling Betsy to get the money out of her children’s names, which can be done easily enough by having them spend it.

  73. “It’s obviously clear that it is not unethical for Trent to give this advice as a legitimate in his eyes. His ethical and moral behavior seems be founded more based on the ethics and morals of others rather than personal conviction. People strongly disagree with him, but is not going to change his position just because of that.”

    What position are you asking me to change? How much I should trust people?

  74. Matt: you’re assuming there is no value in just giving the money to Uncle Phil. I disagree strongly with that. If he is a truly trusted relative, there’s a TON of value in giving the money to Phil.

  75. “You are obviously referring to “trust” as in trusting that the uncle would kick the money back to the child. ”

    No, I am not. You’re adding that assumption yourself.

    I am going to address this fully in a post tomorrow.

  76. Sarah:

    “However, I don’t see how the system could change to make it more “fair.””

    Actually, there is a way, and that’s to make it merit-based.

    What is the purpose of college, after all? I believe it’s to provide a way for dedicated students to further their intellectual and educational experience. But college is not for everyone. Too often these days, college is a place for a bunch of rich kids to get drunk and have sex. Most colleges are interested solely in getting their numbers up, and to do that, they accept as many students as possible. Some of these, frankly, are simply not cut out to be college students. I knew someone in college that was frankly not very smart. She missed all the minimum acceptance guidelines (GPA, ACT score, etc.). She didn’t understand anything in her classes. I tutored her a lot (paid by the school), and yet the knowledge just didn’t congeal.

    It’s a failure in society to believe that EVERYONE is smart. Many people are smart. Many others, though, aren’t. Colleges should be focusing on the students who are smart, who have potential, who might become the next Albert Einstein, the next Werner Heisenberg, the next Nikola Tesla.

    In short, college isn’t for everyone. Some people simply just aren’t cut out for it. Colleges should be focused on the ones who are, and financial aid should be provided to the most brilliant of these.

  77. “Matt: you’re assuming there is no value in just giving the money to Uncle Phil. I disagree strongly with that. If he is a truly trusted relative, there’s a TON of value in giving the money to Phil.”

    There may be value in giving the money to Uncle Phil in some karmic sense. What does that have to do with the question? Betsy wants to know how to maximize financial aid given the fact that her children have significant sums of money in their names. You are surely the first advisor who has ever said, “Give the money to someone you trust and hope things work out for the best.” The fact is, that wasn’t really your advice anyway – it’s just a corner you have painted yourself into in trying to defend your advice instead of admitting that it was poorly thought out.

  78. “Actually, there is a way, and that’s to make it merit-based.”

    Bingo. I agree with this wholeheartedly. Financial numbers shouldn’t even be part of the decision – candidates should be selected based on their merit.

    Here’s how I’d do it at a given college. Some percentage of the incoming student slots would be free, entirely based on merit. The applications wouldn’t show any gender, ethnic, or personal information at all. The exact percentage would be based on the financial state of the institution.

    The other slots would be opened and students could pay to get in provided they met the minimum requirements for admission (stuff like the ACT). But *no* financial aid.

  79. “There may be value in giving the money to Uncle Phil in some karmic sense. What does that have to do with the question? Betsy wants to know how to maximize financial aid given the fact that her children have significant sums of money in their names. You are surely the first advisor who has ever said, “Give the money to someone you trust and hope things work out for the best.” The fact is, that wasn’t really your advice anyway – it’s just a corner you have painted yourself into in trying to defend your advice instead of admitting that it was poorly thought out.”

    No, you just vastly undervalue trust. Perhaps I overvalue it. Wait for the next main article – it should be up in a few minutes.

  80. Rick – your points are interesting, but separate from the argument that one is justified in ripping off the federal government and colleges by hiding assets. Furthermore, every college I’ve been involved with admits students based almost entirely on merit. Granted, I’m talking about top-50 ranked colleges.

    Trent – this discussion has turned so idiotic that I’m afraid I’ll choose to stop reading your blog after today. You’re turned giving immoral and illegal financial advice into some bizarre trust-oriented argument. Here’s the real point about trust: the government is trusting all of us to be honest (in intent and in actions) about the full extent of our financial realities so that they can give out financial aid accordingly. Trusting our uncle has nothing to do with it.

  81. “Matt: you’re assuming there is no value in just giving the money to Uncle Phil. I disagree strongly with that. If he is a truly trusted relative, there’s a TON of value in giving the money to Phil.”

    I guess I just don’t understand how this “value” relates to helping a family plan for financial aid for college (as was the originally voiced question) UNLESS you assume that you will receive some benefit from Phil that outweighs the loss of our mythical 10K out of your kid’s college fund.

    That’s the only reason to do it. Not because you’re a nice person, not because Phil’s a nice guy. Otherwise, why not just give him some of your own money? Why give him the kids cash unless its to remove assets in their names? You’re trying to game the system, and it is really really shady and I’m getting even MORE confused based on the attempt to turn this into a family/trust/whatever issue – that’s not what it started as and that’s STILL not what your post is talking about up there. This action is WRONG, and encouraging people to game the system, risk their hard earned money, and possibly get in trouble with the law is just as bad.

    Also, do your really think its okay for someone to go to school on a hardship scholarship (hardship therefore implying that you know, they actually have a financial hardship and a real NEED), when they have 40k in cash squirreled away in a bank account? They’re probably taking money away from someone who DOES truly need it, and maybe couldn’t go to college because they didn’t have it? That kind of thing is every bit as loathsome as people who refuse to get jobs because it might raise their income enough that they’d have to pay taxes.

  82. As someone who is in the financial aid system for college, the FASFA formulas figure parents can pay around 6% of assets for college. The children pay a higher percentage, 30% or so. There is a base amount (allowance) of assets they let you have before the formula starts kicking in the 6%. I’m thinking it’s somewhere around $50,000. I don’t have time to investigate the numbers again right now. I *do* know the FASFA does not take into account retirement assets. It is mostly based on income for our particular situation. We chose to put our savings into retirement accounts instead of child college savings account. This is a legal way of maximizing aid. Our FASFA amount is still over $20,000 which is fine with me. We should be expected to pay our fair share. A FASFA of > $20, 000 means we get no need-based aid for public state universities. Again, that is fair. We can quality for private university financial aid because their cost of attendence is higher. I also think the form (one of the forms, not sure if it’s for the PROFILE form most private universities use) or the FASFA specifically asks if any college costs are being covered by anyone other than parents and student. I don’t have this situation myself (too bad, haha) but this is an area which is definitely pays to educate yourself in the underlying rules. Hiding assets is wrong.

  83. I’m going to follow Sarah out the door because at this point I really do have nothing but insults to offer.

  84. I love that people are so concerned that the federal government not pay out any extra money by subsidizing the education of people who can “afford” it. Personally, I would rather rich kids go to school using my tax dollars than most other things the government spends my money on. Calm down people!

  85. I usually agree with your advice because you qualify so much of it with things like “but I’m no expert” or “everyone is different.” But I think your advice about not picking a major and taking general electives to be outright wrong. What if this kid is a senior? Don’t pick a major????

    I think you yourself are the perfect role model as to why this answer is wrong: you didn’t do that and now you have the financial wherewithal to do what you really want: write. I think that telling a college student to just go out there and chase his or her dream (regardless of the financial aspect) is wholly irresponsible.

  86. Matt,
    I’ll be following you and Sarah out the door of readership! It’s unfortunate to be reading immoral and illegal advice on a blog and to then see it so blindly defended. And it’s even more bizarre to have the discourse then twisted into something about “trust” then the bloggers underlying advice was based on violating the trust of the government, the colleges, and possibly even the person who originally gave the kids the money for college.
    Joe

  87. “I think you yourself are the perfect role model as to why this answer is wrong: you didn’t do that and now you have the financial wherewithal to do what you really want: write.”

    I also spent six years getting a degree that I’m not currently using and I’m still facing student loan debt paying it off. A little bit of patience and self-reflection in college would have gone a long way – I regret not actually chasing my dreams then, but instead shepherding myself into majors that weren’t really right for me. It’s something that I regret all the time.

  88. The ethics part of this “argument” about financial aid is interesting and I think shows that we all have different sets of personal/professional ethics.

    My own personal example is my parents. When I was sixteen, they “gave” their farm back to the bank in 1985 after 6 years of paying mortgage. They owned more than what the farm was worth because of the drop in land prices and were struggling with the mortgage payments. They did NOT declare bankruptcy and spent the next 6 or 7 years paying off what they still owed the bank. All the while they paid rent to the new landowners! I admire my father very much for this ethic but I realize that some see it as “foolish” because my dad could have taken advantage of the bankruptcy laws so he could come out ahead. Different ethics for different folks. For me, I strive to meet the ethically standards of my parents. What everyone else would or is doing is of little interest to me.

    HOWEVER my question for Trent is off of the ethical argument and back to a financial one. Is the Uncle only going to give back the $10,000 after 10 years? Or is there any “agreement;)” in how he would invest his gift and how much would come back to the kids? Wouldn’t the kids potentially be better off financially with investing the money – if not in stocks or index funds then at least with high yield CDs?

    Plus besides the ethical question wouldn’t the kids learn very little about how to manage money with this scenario? In fact wouldn’t they “learn” that blindingly (even if it is a trusting situation) turning their finances over to someone else if the “right” way to manage money? For me, this is not a lesson I would want to teach my kids. I don’t see how in the long run saving a bit of money on college would “help” them.

  89. Have you considered giving a status report to the mailbag questioners about the status of their questions ? For example, already answered-in-this earlier-post, one-word-answer-yes/no/i dont know, dont-want-to-answer, not-my-domain, pending, working right-now-expect-shortly etc. No doubt it takes extra work, you are free to ignore this suggestion, but I think, if done, it might help you connect better with your readers.

  90. “It’s something that I regret all the time.”

    Maybe you shouldn’t spend so much time looking in your past and focus on the future. Why regret the past? You can’t change it.

  91. I read your site regularly and I’m dumbfounded by your insistence on name-brand diapers. We use store brand (usually Target, but sometimes others) for daytime diapers and name-brand at nighttime only. For the daytime, when my daughter goes maybe 3-4 hours (if that) between changes, name brand diapers are more than sufficient.

    I can understand using name-brand diapers at night because they do hold a larger capacity without leaks. But saving on daytime diapers reduces by almost half the overall cost-per-diaper that I pay.

    This is far preferable to me that messing with the extra work needed with cloth diapers.

  92. NES is the better system for a number of reasons but for me its mainly because of “Contra,” “Metroid,” and “Mike Tyson’s Punch Out.” Classics.

  93. I’d like to present a different opinion about disposable diapers. I use any brand, and I have had no more problems with one over the other so far with my 4 month-old. **Try out the cheap ones!**

    http://www.babycheapskate.blogspot.com/ has very good advice about diaper-buying, number of diapers per pack, diaper deals and reviews of store-brand diapers from parents.

  94. On the financial aid front:

    Seriously people, look at the disclaimer at bottom of the page. Trent is sharing his opinion with you guys, he’s not preaching the gospel, and you aren’t paying him a cent for his advice. If you disagree, then fine, but I’m not sure why it’s such a big deal. And no complaints about rising college tuitions from you.

  95. I have been a long time reader of The Simple Dollar, but this advice gives me serious doubts about my future readership. It is illegal, unethical, and wholly unlike the great advice I have been so fortunate to get from the previous Trent.

  96. “I’ll be following you and Sarah out the door of readership!”

    It’s your own loss than, while I don’t agree with everything Trent advocates (his anti TV stance for instance) it’s more than made up for by excellence in other areas.

    or to put it this way,
    The odd dump/stupid/misguided post is more up for the quality of the rest. It’s the nature of the business.

    Secondly:

    Don’t kid yourself unless your planning on turning “Mennonite” canning is a huge and I mean huge amount of work, the payoff to me is tiny compared to the amount of work. My wife did a ton a canning before we got married and never did after, too much work.

  97. I would also add that I think is investing advice is pretty crap as well but this doesn’t mean I’m going to stop reading his posts for that reason, I simply skip those ones.

    BTW I love the reader mailbag as well.

  98. Trent,

    I think it’s getting overshadowed here, but any response on the investment advice you gave? Please refer to my 2 comments above…

  99. I have to agree with most readers here that suggesting someone hide finances in the name of a relative to qualify for extra federal aid is absolutely unethical and also illegal fraud.

    Why doesn’t the family in question just invest the money and then use it to pay for college as it was actually intended?

    Jim

  100. Dave, I may have not directly answered Lynn’s question. My understanding is that (s)he was under the belief that she was getting more for her buck by buying a lot of shares of STAR than a few shares of VFINX, which is the piece I focused on. That’s part of why I made up that hypothetical fund with the same returns as VFINX – to demonstrate that share value doesn’t mean much.

    If you’re looking at STAR versus VFINX on a deeper level than that, it merits its own post.

  101. OK.

    I still don’t like the implication that a fund’s past return is a major factor in portfolio allocation decisions. I was surprised to see you write that, after you gave such great reviews to Mr. Bogle’s Little Book.

    DSW II

  102. I would personally trust by brother, parents, wife’s parents, wife’s sister with the money, but yes there would need to be a verbal understanding.

    I guess I wouldn’t feel guilty hiding the money because I honestly believe that so much money is extorted from me in the first place in the form of taxes. I would rather have no tax money go to financial aid in the first place. In my opinion, there is no shame in people working their way through school if their parents will not pay. My wife paid her own way, I was lucky enough to have my parents cover mine.

    I am currently aggressively funding my own children’s college funds and will use any legal means to maximize my investment.

  103. Also regarding your answer to Lynn’s question: You talk about “yield” and “rate of return” as if they were synonymous. They are not.

  104. I think people underestimate the value of international travel as education- cultures, worldview, languages.
    Strangely, though, I have no room to talk. I’ve been across the Canadian border, and that’s it.

  105. Regarding the fin.aid point, there are certainly legal and ethical ways to ensure the money goes to the child for college expenses. Why not gift the money to grandparents, who can then open a 529 plan for the child? Grandparents’ assets, which this 529 would qualify under, do not count towards assets controlled by either parents or students under the FAFSA forms.

  106. My grandpa had an educational trust fund for my college, although not enough to cover the whole thing. While my grandfather is well endowed, my parents don’t have much money. Thus on FAFSA (the federal financial aid form) our family looked poor and I received a lot of financial aid. My grandpa’s trust, which did not go on the fafsa because it only asks information from the student and their parents, paid for the rest of my school without counting against my needs. I highly recommend you follow Trent’s advice and put the money into the hands of a very trusted family member.

    Also, an fyi for later on in life, if your student persues a post bachelor degree, they are considered independent and the parents’ money will no longer count in their assessment of financial need.

  107. We were given some rather awful advice from an “official” help-you-get-scholarships company (read: Scammers!). They said that I as the student had to earn as little money as possible before I went to college, and to not have any assets in my name in order to maximize my financial aid. I understand not putting money into a child’s name (unless in a 529 or college-specific plan) because more of it is counted when calculating financial aid, but I wish I had worked more. Because I didn’t have any money and my mom was also broke, I have about $17k in student loans (not much compared to some, but a lot to me). If I had had more money saved, it wouldn’t have affected my financial aid status any (because I got very little), and I would have been in a better situation then and now.
    On the other side of the coin, my husband now goes to school and I am working full-time to support him. He gets nothing but loans. He hasn’t once got a scholarship, even though his grades would merit them. Yes, loans are part of financial aid, and I am glad we can at least get those, but they are still loans and debt that we don’t want. There is something very definitely wrong with the FAFSA system when we can’t make ends meet, but we don’t qualify for aid. I’m glad that 529s and other college savings accounts are around now, and will use them for our children. I wish they had been when I was younger so that we could have taken advantage of them.

  108. I was in a situation similar to Rick’s, in that my parents made way too much money for me to be considered for any need-based financial aid, but they decided that my siblings and I would be responsible for our own college tuition. Because of that, I chose to attend a public university that offered me a merit-based scholarship, even though I was accepted to better schools.

    I definitely think the system is screwed up, because, as Trent said, it rewards families that are irresponsible with their money. I think the reason college tuition is so astronomically expensive is, in part, to make up for all the financial aid colleges are providing. Tuition keeps increasing so that fewer and fewer people can afford it, and those who can are shouldering the cost of those who are getting financial aid.

    Still, I hardly see that as a reason to try to cheat. I don’t know anything about the legality of the scheme Trent proposed, but it certainly seems unethical, and I was a bit surprised to see Trent suggest it (sorry, but I don’t buy that the intention was to suggest giving the money as a no-strings-attached gift; the original wording was pretty clear that the intention was to give the money to a trusted relative who will give it back when the child is in college).

  109. You talk about this being purely a trust issue – but what about the trust between parent and child? I’m too old for this to be an issue anymore, but as a child/teen, if I’d had a nice inheritance and my parents decided that I should give it away, I would have been a little bitter. Even if that money came back to me ten-fold through other avenues, I would still remember being forced to give it away originally. And what if it didn’t come back to be? Uncle Phil dies or goes broke, financial aid doesn’t kick in, and there I am without my inheritance. Not exactly the way to build trust.

  110. The answers you provided to Allie are pretty good but I would like to know how you would change your financial planning. If you would like to keep some funds for your child as college funds, how do you prepare?

  111. Oh my gosh, I’m so sorry you get crazy emails like that!! I had no idea it was so bad out there.

    That makes me grateful my blog is only visited by a handful of people a day–I couldn’t handle the things you deal with, honestly. I think I’m going to keep my blog’s purpose simply for my own enjoyment, and not be so jealous of your success and monetary gain from it. That’s a good lesson to learn for me–there’s always a dark side to success. Thanks, Trent.

  112. Regarding the financial aid question – why does this family not just use the money they have to send the child to college and, once that money is spent, apply for financial aid at that point?

  113. I doubt Besty will read this, but here’s my thoughts anyway. First, if you have been given money that you would like to spend on your children’s education then you need to be planning on the best way to save/grow it rather than how can I keep it from hindering my ability to get “free money”. Here’s why, do you believe social security will be around in 10 to 15 yrs? If you do, then I will say do the math. Do you realize that 45% of the working population will be retirement age in 10 years? The US ecomony can not support those people with social security. Same goes for federal funding of higher education. The the cost of college is raising at 7% a year (almost twice the rate of inflation), I don’t believe the US gov’t can give out grants the same way they have in the pass either. So, to give the money away (Trent’s advice) hoping that karma (trusting family memebers) will be there to pick you up and help foot the bill, it’s a very risky investment strategy when you have 4 children. Also, assuming that the goverment will continue to give federal aid 10+ years from now is very risky!

    There are several options, all differenting depending on your situation. If you are truly trying to get the most “free dollars” (aka grants), and you were going to entertain “giving the money to a family member”, then I would say it would be better to open a mutual fund and leave the money in there until your oldest child turns 16. Then on each child’s 16th birthday, put 25% out (if we are “being fair”) and open a Roth IRA in their name (as long as they have a part time job they can have an IRA – parents are allowed to put up to the max for the year into their child’s IRA – transfering weath tax free). This is of course assuming you were going to give the money away (in the end not using the money for education at all… then why not use it for retirement). Here’s why, 2 reasons, 1) Retirment accounts ARE NOT included in the FAFSA calculation! They won’t be counted against them for fed or state aid and 2) You will be teaching them to save in their own retirment account that will have many years to compound before retiremnt! Again, this is only one way if you were going to give the money away anyway to use for your children’s future and it not count against them in the FAFSA calculation.

    One more thought, if you were “being fair” and was going to split the money between the four children, you have to remeber that they my not all go to college, but I bet God willing, they will retire one day (sooner than us if they set up IRAs at 16)!

    Of course there are better/other options for college savings! I have so many “out of the box” ideas. Wish I had more time to share!

  114. Hi,

    Just wanted to comment on advice you gave to a reader about purchasing a crib at a yard sale – I don’t know what the laws are in the USA, but in Canada, there are a few things that one can’t re-sell at a yard sale. Baby cribs are one of those items, child car seats are the other. Missing parts or older, unsafe cribs can cause harm. Car seats ‘expire’; the plastic degrades and weakens over time, compromising safety.

    Wonderful blog – I enjoy it daily!

    Chris.

  115. @Sheila,

    “Regarding the financial aid question – why does this family not just use the money they have to send the child to college and, once that money is spent, apply for financial aid at that point?”

    Because then you would actually have to be honest and not try to get free money out of the system that is designed for people who don’t have a small amount of cash on hand. Why would anyone want to do a thing like that?*

    *sarcasm

  116. @Jon

    That was my first thought about that situation also.

    But my query was real. Is there a reason that you can not apply for financial aid when your other resources are exhausted? It’s been a long time since I was in college but I have a daughter who will be attending college in a few years.

  117. @Sheila,

    There is no reason why you cannot do that. Unless it has changed in the last three years, you fill out a FAFSA every year after filing your taxes for the previous year. I actually had money saved up from working in high school so my expected contribution was higher the first year. After I burned through that money, my expected contribution was lower and I actually picked up an additional grant for the remaining years based on my financial status.
    In my opinion, one of the best ways to pay for college (if possible for your degree) is to go to a school that offers a co-op program. You get amazing experience and a boatload more pay than just working a summer job (2-3 times more). In addition, co-op pay through a legitimate co-op program does not count toward your income up to a certain amount (which is actually quite high as I never reached it). It is classified as a scholarship and therefore exempt when computing expected family contributions and additional financial aid. Most kids i knew at my university averaged $65,000 or more in total co-op wages over 4-5 years.

  118. Forgot a bit…
    The University has recently implemented a pure merit based scholarship program that pays up to 50% of tuition costs for high grades and test scores. Combine that with co-op wages and I would guess that most students should be coming out with either very little in loans or even a nice bankroll if managed correctly.

  119. @Jon

    Thanks so much for the reply. I was very lucky when I went to college (70′s) in that I had a full scholarship that even covered books. So the whole financial aid scene is a mystery to me. But, as I said, I do have a daughter so I guess it’s time to start learning all I can.

    Thanks again!

  120. Many people here are agreeing that the financial aid system is unfair but that “cheating” it (by doing everything possible legally to increase your aid calculation) is still immoral and doesn’t help.

    Let me put it simply. The squeaky wheel gets the oil, folks. You don’t fix an unfair system by cajoling 90% of the population into submission while the remaining 10% get a huge advantage. If everybody took maximum advantage of the system, it would either be amended or it would collapse and a different system would take its place. Problem solved.

    As for the cries for a merit based system, well, that’s awfully naive. It completely ignores the possibility that financial status has an impact on any realistic measure of scholastic aptitude and so certain poor groups need to have an artificial booster. Furthermore, it would be completely retarded to have an aid system that gives monetary assistance to millionaires, even occasionally.

  121. I too have been amazed at how expensive it is to pay for college. We have chosen to help pay for our children’s education, and it is very difficult for us. Your original poster is very fortunate to have been given such a gift by the grandparents. However, hiding assets to qualify for Federal financial aid is fraud, and I cannot seriously believe that you would recommended it.

    In this case, it appears that your own personal anger from your college experience is preventing you from bringing your readers good advice. There are other, better, strategies for paying for college than gaming the system (e.g. welfare fraud).

  122. @Matt, Sarah, et al. – please don’t leave. This blog needs critical thinkers who will challenge Trent in the comments. Without people like you, innocent readers may actually follow Trent’s bad advice.

  123. Just read your post regarding private schooling and it surprised me. Have you done much research into private schooling? Many people in Australia also have a preconceived idea that private schooling is some kind of snobbery – that we educate our children there so they ‘mix with rich people’. We also live in an area where the public schooling is regarded as the best in the country but choose to send our children to a private school (along with half of the population of the area). Why? Because of the teachers and the involvement I am allowed to have in my children’s education. I believe that I am my children’s primary educator and I allow others influence at my choosing. Too many of the public schools have the impression that they should not be questioned regarding their methods, subject matter and manner of relating. Wrong!!! Not with my child you don’t!! I have also found a prevalent attitude among people who send their children to public schools – and that is of their ‘entitlement’ to free education because they pay taxes …. but I have found that what you get out of it reflects what you put in. While our local government tries different methods to stem the flow from state schools to private schools, it is a pity they don’t ask people why they send their children to private schools. They don’t ask because they think they already know.

  124. I agree that the private school dialogue seems to be biased. I don’t necisarily think that the school is the best indicator of a child’s success. Parents have to be active in their kid’s learning as well. That being said, there are a lot of advantages a private school education. They often have less funds to work with and they put them to better use. Depending on what type of school (religious or otherwise) the actual curriculum may actually be more in tune with your values. For instance, at the school I went to, we studied the theory of evolution but it was not preached as fact. In fact, now that I attend a public university, I find it rather offensive that it is OK to teach evolution, big-bang, etc. but mentioning anything about the creation theory is taboo. Also, being a vegetarian, going to a Seventh Day Adventist school was great because I never had to worry about finding meat in anything being served. In fact, some of my non SDA classmates chose the school because of the vegetarian issue. I’m just saying that there are a lot of things to think about when choosing a school. You get what you pay for and “free” does not always equate to good. But the fact is that a lot of families who choose private school are lower/middle class. They are not snobs. My parents had to make a lot of sacrifices to send me to private school, taking out loans at times. It just bothers me that there is such a stigma attached to this concept, the steriotypical idea that attending private school makes one a snob or only lawyers/dr’s go to these schools and they don’t get immersed in culture, diversity, will not be so well adjusted, etc.

  125. Hi,

    I think I may have one of a kind/original/classic comic books but I don’t how to authenticate much less sell them. Can you help? Thanks.

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